Day 266: Another Portfolio Milestone


Mother's Little Helper portfolio was UP today +7,567.85 (+0.93%).

Overall GAIN YTD: +$234,654.81 (+40.19%).

Our benchmark index, the S&P 500 is up +11.84% Year To Date.

http://money.cnn.com/data/markets/sandp/

The portfolio is up significantly today, so I thought I'd talk about some of the companies that are at the top of the leader board. We had 18 companies that gained more than 1% today. Netease, Nvidia, Stamps.com, Lam Research, Cognex, IPG Photonics, Omeros.

Today we saw impressive gains from Chinese game maker Netease, up over 8% today. After reporting less than spectacular numbers last quarter, investors look like they are taking a longer term view of the company as they buy back shares today. Today's gain has replaced a significant portion of last quarters share price losses. I have a $300 price target on NTES.

Nvidia was the most talked about stock of the day on Wall Street, up over 4% today. The graphics chip maker saw shares go 'en fuego' today after several analysts raised their price targets. Bank of America Merrill Lynch analyst Vivek Arya raised his price target to $210 from $185. I still believe there isn't an analyst on the street who fully understands why this company is so important and why it has such a huge moat around its castle. At the beginnning of the year I had a price target of $200/share and by June I was projecting $300. When we here news about 'The Cloud' that's Nvidia. The Cloud requires data centers and Nvidia's chip sets are at the heart of every data center. Consider that by 2020 The Internet of Things will be blasting around 50 Trillion Gigabytes of Data. Autonomous cars will send and receive 4000 times more data than an individual does in the same time. Major cloud providers are estimating that they will need to triple their infrastructure by 2020. This amount of growth will most likely lead to more mergers and acquisitions. Nvidia is a whole lot more than data centers. Best know for their best in class graphics boards for gaming, Nvidia is also making critical chips for autonomous cars and Computer Aided Design (CAD). CAD software is at the heart of everything we make, everything you interact with, like phones, computers, cars, calculators, bottles, a pen, packaging, clothing, you name it. Then there's artificial intelligence, again Nvidia is a leading player. Having invested over $10 billion in research and development in AI, Nvidia has a big lead on many in the space.

Stamps.com was named one of Forbes fastest growing companies for 2017 and today gained almost 3% a share. With a current share price of $205 and an average analysts price target of $230 a share, this is one unloved company considering all it has going for it. The most bullish analyst has set his target at $250. Today we learned that the Tennessee Treasury Department increased its stake in STMP as did several other institutional investors. If you want to invest in the rapid growth of online shopping and ecommerce its easy to buy shares of Amazon, ebay, and many others, but investors everywhere know those companies. I prefer the approach of selling picks, shovels and gold pans to miners by investing in a company like stamps.com that benefits from all the shipping of eCommerce shopping while having a relatively low cost of goods. I can buy stamps at the post office or I can pay a bit extra for the massive convenience of a stamps.com account and supplies. It's a razor and blade business model.

Semiconductor equipment maker Lam Research surged today $.32/share to close at $177.31. Today we learned that a top equity firm Chicago Equity Partners, LLC purchased over $4.2 millin worth of LAM stock. In addition several other equity firms increase their stake in LAM. With a Price to earnings ration of just 19, it trades at a significant discount to its peers. A lower price to earnings ratio makes me want to look at the price to projected earnings ratio and price to earnings growth rate. If these are also lower than peers this might indicate that Lam is trailing its peers and investors have lower expectations. In fact Lam is lower than its peers in box ratios. However, actual Sales Growth is significantly higher than its peers which says to me, Lam is steeling market share. While this is a stock that goes up and down with cycles of capital equipment buying from semiconductor companies, I think there is plenty of room to run here. The current analysts average consensus price target is $191, my own target is $225.

Cognex was up almost 2.25% today and is already trading above the average consensus price target. Last week there was notable outflows of Cognex from ETF. More simply, exchange traded funds were selling shares to take profits. That dip in the share price is probably what led to the buying we saw today. Cognex Corporation provides machine vision products that capture and analyze visual information in order to automate tasks primarily in manufacturing processes worldwide. The company offers machine vision products, which are used to automate the manufacturing and tracking of discrete items, such as mobile phones, aspirin bottles, and automobile tires by locating, identifying, inspecting, and measuring them during the manufacturing or distribution process. In short, Cognex is a bet on the future of manufacturing and supply chain management. Want to invest in Apple, Amazon, Boeing, GM; these are all companies with complex supply chain management and Cognex makes the complexity go away; that's valuable and the market is growing.

IPG Photonics is another stealth technology company that touches our lives every day. IPG was up nearly $3 a share today as traders who watch technical chart signals took notice of this under valued technology company. IPG manufactures a broad line of fiber lasers that are used in numerous markets for very diverse applications. The principal market is materials processing. Other markets include communications, medical and advanced. IPG's products are used to make the products or provide the services that touch our lives in many different ways, from razor blades that their products weld, cars we drive made with robotic laser welding, computer semiconductors and disk drives that their lasers manufacture, aircraft that their products weld, magazines you read printed with the help of their lasers, even the broadband service delivered to your home. IPG lasers are also used in skin rejuvenation, such as wrinkle removal. It's very likely that Cognex uses IPG lasers in their equipment. The other thing this company does really well is grow earnings. Last year IPGP grew earnings over 7%, next year analysts are expecting earnings growth of over 36% and longer term earnings are expected to grow at over 20% per year. Diversified, stealth tech that consistently makes money and reinvests its cash into R&D, don't look for a dividend here.

Omeros had a good day, adding 1.50% to close the day at $20.96, we added it to the portfolio at just $10.70/share at the beginning of the year. I think todays gains were based on nothing. There really isn't any news to report on Omeros but the stock has been down over the last few months because of a bearish article to put a cloud over the company. Omeros is bringing a law suit against teh author and claims significant inaccuracies. I love this small cap biotech company. One of my favorite things about Omeros is that it has a good pipeline of new drug candidates, like OMS721 for the treatment of life threatening blood clots in tiny vessels. The best thing about Omeros is the success of Omidria, a terrific new drug that is generating revenues to fund the development of the pipeline. Omidria is used in cataract surgery and helps reduce complications that can occur when removing cataracts. Surgeons seem to like Omidria and sales are booming. very few analysts track the stock but my current projection based mostly on potential sales of existing and new products is $36.

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Clay Baker

Disclosure: I am personally invested long in these stocks that appear in the MLH portfolio and may purchase or sell shares within the next 72 hours. I am also invested in other stocks that do not appear in the MLH portfolio: BA, BRK.B, CELG, CSCO, CTXS, CVX, DOW, DVAX, FB, IBM, NTES, NVDA, OMER, PFE, PG, RDHL, SCHW, THO, TWX, VEEV, VZ, XLNX, XOM

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.

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